.August 30, 2024 10:15 AM

Dell Technologies Inc. (NYSE:DELL) saw its shares rise over 5% pre-market after reporting strong second-quarter results, exceeding Wall Street expectations. The company’s infrastructure solutions segment, fueled by high demand for AI-optimized servers, achieved record revenue, leading to an increase in full-year earnings outlook.

In the second quarter, Dell posted adjusted earnings of $1.89 per share on revenue of $25.00 billion, surpassing analyst estimates of $1.68 per share on $24.14 billion in revenue.

The Infrastructure Solutions Group (ISG) at Dell, which includes AI-optimized servers and networking hardware, reported record revenue of $11.6 billion, up 38% year-over-year. Servers and networking revenue alone reached $7.7 billion, a significant 80% increase from the previous year.

Dell raised its earnings per share (EPS) guidance for the full year 2025 to a range of $7.55 to $8.05, up from the previous forecast of $7.40 to $7.90, reflecting its strong performance.

Analysts at Bernstein highlighted Dell’s robust AI server metrics but noted that profitability in this segment remains a challenge, estimating gross margins between 8% and 14% and an operating profit margin of around 5%.

Goldman Sachs analysts expressed optimism about Dell’s improving AI server margins, expecting them to enhance the company’s valuation and support its mid-term growth outlook. They also anticipate a recovery in PC demand, similar to HP’s experience, within the next 12 months.